Group Chap 34: Health Risk Adjustment Flashcards
Introduction
- 2 Steps - Risk Assessment and Payment Adjsutments
- Uses of Risk Adjustment
1. Health risk adjustment is the process of adjusting measures of healthcare utilization or cost to reflect the health status of members
2. First step– risk assessment. Assessing the relative risk of each person in a group
3. Second step – payment adjustment. Adjusting payments to reflect differences in risk
4. Risk adjuster – refers to a particular risk assessment method
5. The use of health risk adjustment
a. CMS uses medical diagnosis codes to adjust payments to insurers who administer Medicare Advantage (Part C) and Part D
b. States use diagnosis codes to adjust payments to Medicaid managed care plans
c. ACA includes risk adjustment that applies to most enrollees in the individual and small group market
d. Employers use risk adjustment to analyze how employee contributions should vary by choice of health plan
e. Insurers using risk assessment for provider profiling, case management, provider payment (including value-based payment methods), and rating/underwriting
6. Need for health risk adjustment
a. To provide equitable payments to insurers and providers and make fair comparisons among insurers and providers
b. One goal is to induce insurers and providers to compete on efficiency and quality, rather than selection of healthier risks
▪ Insurers that enroll a greater proportion of healthy individuals than their competitors will have lower premiums. Appear to be more efficient because of low premiums, but actually not managing health care costs any better
c. Second goal is to preserve choice for consumers and have consumers pay an appropriate price for their choice of insurer or provider
d. ACA requires guaranteed issue and limits the risk characteristics that can be used to adjust premiums
▪ Problematic when insurers enroll very different mixes of risks but are unable to vary their premium rates to adequately reflect the variation in risk
▪ Under ACA risk adjustment program, insurers receive supplemental payments, or pay supplemental charges, depending on whether their enrolled population is sicker or healthier than average
e. In effect, adjuster increases the premium for plans covering lower than average risks and vice versa
7. Average premium reflects enrollees’ relative risk
a. Risk scores are constructed to be additive
b. Risk weight for each condition a person has is added together to equal the total risk score for that person
c. In many models, individuals without any identifiable conditions receive a risk score > 0. This recognizes that individuals’ costs regress towards the mean, implying higher costs for those with low historic costs
Health Risk Assessment
- Health risk is defined and measured in terms of the expected cost of medical care usage
- Risk assessment determines the relative health risk of individuals in a particular risk class
- Assessment involves risk classification and risk measurement
a. Risk classification: pooling individuals with similar risk characteristics
b. Risk measurement: quantifying the level of risk of individuals within a risk class - Risk assessment methods
a. Risk classification schemes
▪ Demographics
* Age, gender, family status, geographic location
* Age and gender often incorporated in diagnosis-based risk assessment methods
▪ Utilization measures or claim expenditures
* Often used for risk assessment for rating employer groups
* Inappropriate for health risk adjustment. Want to exclude the impact of provider fee levels, provider practice patterns, and health insurers’ care management practices
▪ Diagnosis and pharmacy information
* Use for health risk assessment is very common
* ACA risk adjustment models began to include pharmacy information starting in 2018 (in addition to medical diagnoses)
▪ Medical information or history
* Biomedical measurements that might be used include blood pressure, cholesterol, height weight
* Medical history questionnaires solicit information on general health statistics and prior medical conditions
* ACA eliminated health underwriting in individual and small group
▪ Perceived health status
* Based on self-assessment determined through a questionnaire
▪ Functional health status
* Ability to perform various basic activities of daily living (bathing, dressing, transferring, toileting, continence, and feeding)
* This approach is used to determine eligibility for LTC benefits
▪ Lifestyle and behavior factors (smoking, fitness level, substance abuse, diet)
▪ Multiple classification criteria
* Common to use one or more of the above criteria
* Almost all commercially available risk assessment tools use both diagnosis and demographic information to assign risk scores to each member
b. Risk measurement
▪ Risk adjustment mechanism needs to reflect the relative risk factors for all insurers combined
▪ Data must be collected from all insurers on the same basis
▪ Risk classification scheme must clearly define in which category the individuals belong
▪ Timing is an issue, because must collect data from all insurers in the market
* Not always possible, so approximate by using large employer data
▪ Example
* Suppose the market only has 2 insurers (Insurer A and Insurer B)
* Average claim cost for low, average, and high risks is $100, $200, and $600
* Weighted average claim cost for each insurer and the entire market is as follows, weighted by the proportion of enrollees in each risk category:
o Insurer A: .45 x $100 + .5 x $200 + .05 x $600 = $175 weighted average
o Insurer B: .35 x $100 + .5 x $200 + .15 x $600 = $225 weighted average
o Market Total: .4 x $100 + .5 x $200 + .1 x $600 = $200 weighted average
o Insurer A Relative Risk Factor = 175 / 200 = 0.875
o Insurer B Relative Risk Factor = 225 / 200 = 1.125
